Snow Says Plan Will Give Economy a Boost

MARTIN CRUTSINGER

Published 7:00 pm, Wednesday, February 12, 2003

AP Economics Writer

New Treasury Secretary John Snow said Thursday that President Bush's proposal for $1.3 trillion worth of tax cuts would give the economy a quick boost and provide long-term benefits that would improve American living standards.

Snow used his first speech since taking office a week ago to defend Bush's economic program against Democrats' arguments that it is too tilted toward the wealthy, offers too little in short-term economic stimulus and cost too much in light of the administration's proposed budget. The spending plan projects record budget deficits this year and next.

Fearing critics were gaining a political edge, Bush's economic team and the president himself are traveling the country to promote the package. Bush visited a Florida business Thursday, urging voters to contact members of Congress on the package's behalf.

"There are some who haven't gotten the message yet and they need to hear from you," Bush said before addressing sailors about potential war in Iraq, the main reason for his Florida trip.

Bush also modified his argument slightly. Although he originally billed the plan as aimed almost entirely at stimulating the economy, Bush declared Thursday it also would provide badly needed reform to the tangled federal tax code.

"It really would make the tax code more fair," he said.

In remarks prepared for delivery at the Detroit Economic Club, Snow said, "Our goal was to do something that would pay off for America long into the future _ not here today, gone tomorrow," he said. Copies of the text were also released in Washington

Snow said the plan, which asks Congress to accelerate some of the tax cuts approved in 2001, would put more money into consumers' pockets this year.

He said it would provide for greater growth in the future by eliminating the double-taxation of stock dividends. The administration says that provision limits business spending to boost productivity, the key to raising living standards.

"Today, our tax laws discourage that investment and job creation and needlessly penalize all those investors _ especially seniors _ by taxing dividends twice," Snow said. "The net effect of double taxation is that the American economy grows more slowly than it should, because it is more costly than it needs to be for businesses to expand and invest."

Federal Reserve Chairman Alan Greenspan told House and Senate committees this week that he strongly supported Bush's wish to eliminate the tax on dividend payments. But Greenspan said the proposal, which costs $385 billion over 10 years, should be paid for either by increasing other taxes or trimming federal spending so as not to add to government deficits.

Asked Thursday if Bush still had confidence in Greenspan, White House spokeswoman Claire Buchan replied, "Yes. The president has a great deal of confidence in Chairman Greenspan. He think he's doing an excellent job."

"His term is not even expiring until the middle of next year so it's sort of silly to begin speculating about that," said Buchan, talking to reporters as she accompanied the president to Florida.

Snow did not directly address Greenspan's comments, which Democrats contend represent a major blow to Bush's sales effort in Congress.

The secretary said the projected deficits _ $304 billion this year, $307 billion next year _ are small in the context of the overall $10 trillion economy, even though they are record levels in dollar amounts.

In response to an audience question, Snow said the debt levels are "quite manageable" and that he still believed surpluses should be the government's long-term goal.

Snow attacked a major part of some Democratic alternatives, which would offer billions of dollars in direct aid to states to help them deal with their own budget shortfalls.

He said such proposals hook states up to "federal life support" and that Bush suggested a better approach with tax cuts to make the economy grow more quickly, which would provide more money to the states and the federal government.

Addressing the charge that too much of Bush's program is devoted to tax cuts for the wealthy, Snow cited benefits for lower income families: eliminating the marriage penalty for two-earner couples; increasing the child tax credit from $600 to $1,000 this year; and cutting the dividend tax, which is paid to many older people on fixed incomes.

Snow's trip to Detroit was part of what Treasury officials are billing as his "heartland tour" to sell Bush's economic policies.

Snow had breakfast Thursday morning at a diner in Livonia, Mich., a suburb of Detroit. In Philadelphia on Friday, he planned a stop at a diner and speak to the Philadelphia Chamber of Commerce.